Question: = 1. Consider So(t) er(s)ds, where r(t) is an adapted process to the filteration generated by a Brownian motion. Show that in case there

= 1. Consider So(t) er(s)ds, where r(t) is an adapted process to

= 1. Consider So(t) er(s)ds, where r(t) is an adapted process to the filteration generated by a Brownian motion. Show that in case there exists a Q martingale measure for the numeriare So, a T - contingent claim can be priced by the formula II(t; ) = E[e`r(s)ds |F(t)]. Using the second fundamental theorem of finance, write out the conditions when each such contingent claim can be priced without creating an arbitrage possibility.

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